1. What Explains The Rise In Cash Renting?
An example of
“Dirt Research”

2. Allen Homestead

3. 2004

4. Lots of Wind Rows everywhere.
(Notice land is fallow)

5. 2012, Windrows being taken out.
(Notice the stubble in the field)

6. “no one uses a cropshare
anymore!”

7. It turns out he’s right.
In 15 years, Cash Rents have gone from twice as common
to 4-5 times as common as Cropshares

8. The Blackboard Economist Explanation:
“Risk sharing is also used to explain the growing dominance
of cash rental agreements in the US. Huffman and Just (2004)
suggest the benefits of risk sharing have changed, as owners
who rent out farmland are now more risk averse than farmers.”
“…risk aversion and risk preference, one of the richest
sources of ad hoc assumptions concerning tastes.”
Stigler and Becker AER 1977

9. Brief Review of
the “Famous” Allen and Lueck (1992) Model
Farmers supply costly to observe “effort”.
Farmers use costly to observe “land attributes”
eg. Moisture, Nitrogen, etc.
3. Cash Renters use too many land attributes.
4. Cropshare contracts mitigate this incentive, but
cause an input distortion on effort, and create
an under reporting incentive for crop output.

10. The A&L model suggests looking at the field level TC, for an
explanation …
… and there has been a quiet revolution going on ...
… No Till Cultivation

11. Conventional Tillage:
Plough the land
Use harrows or disks,
to smooth the land.

12. Plant into loose topsoil
Often cultivate during
growth to kill weeds.

13. Conventional Tillage:
1. Eliminates weeds, natural plants, and prepares bed for seed.
But …
2. Dries out the soil (bare dirt exposed to sun).
3. Decreases moisture storage, infiltration, and nitrogen.
4. Kills small organic matter: microbes, ants, worms …
5. Creates “tillage pan” about 6 inches below surface.
- increases run off.
6. Often requires land to be fallow (idle) to increase moisture.
7. Takes several passes with machinery (fuel costs).
8. Makes land subject to erosion (rain and wind).

14. No Till Avoids all of the costs.
Planting Into last years stubble.
Crushing a winter Rye cover
crop to plant into.
Crop growing through corn stubble.

15. No Till, by Crop, across US 1995-2011.

16. No Till, by Region,

17. No Till, Over Time in US, by Crop

18. No Tillage: Soybeans Over Time

19. The A&L Implication:
No Till Cultivation practically eliminates the farmers
ability to exploit the soil.
Therefore, Cash Rent contracts should dominate.
The transition to No Till should explain the growth in cash
renting.
Data come from USDA Phase 2 and 3 ARM Survey,

22. Why are the wind rows coming out?